ESS Webinar Series Replays: We are excited to bring you replays of each of the Enhanced Security Selection (ESS) package webinars that we have conducted over the past four weeks. These webinars provide some background information on the tools you get with the ESS package and offer potential implementation ideas to put these tools to work. Each webinar is approximately an hour long. Please see the breakdown of topics and their respective video replays listed below.

• May 7^th - The Matrix tool & Models
• May 14^th - Fund Scores & Asset Class Group Scores
• May 22^nd - FSM Models
• May 28^th - Team Builder

Market Webinar Replay: We also have a video replay and slides available from our lastest Market Update Webinar from Monday, June 1^st:

• Video replay found here
• Slides found here

Zoom-ing Higher: As far as historic disruptions to social and economic ways of life, very few in the modern era have been as immediate and as widespread as the COVID-19 outbreak and fallout. In business, however, one company’s (or industry’s) folly is another’s fortune. Perhaps the single best example of a company that has benefited from the current environment lies with Zoom Inc. ZM, which provides teleconference software to individuals and businesses. While Zoom is certainly not the first in this space, its success has been meteoric and has captured the attention of investors seeking the “next big thing” in an era of IPO flops and broken unicorn dreams. Since ZM first began trading on April 17th, 2019, the stock has returned a whopping 478% relative to the S&P 500’s SPX 6.22% during the same period (as of 6/2/20). While the first year of trading was choppy, 2020 has proven much more fruitful as the software provider has rocketed 205.82% on a year-to-date basis. On yesterday’s earnings call, Zoom reported an increase in monthly active mobile app users from 14 million on March 4th to 173 million monthly users as of May 27th, placing an exclamation mark on just how integral of a product Zoom has become during the current market environment (source: CNBC). In fact, after today’s close, ZM’s market cap is higher than that of the 5 largest U.S. airlines that have undoubtedly been impacted by travel restrictions and lockdowns (source: Factset). Despite the success for this strong 5 for 5’er, ZM is heavily overbought at current levels and does not find near-term support until $150 on its default chart.

Each week the analysts at DWA review and comment on all major asset classes in the global markets. Shown below is the summary or snapshot of the primary technical indicators we follow for multiple areas. Should there be changes mid-week we will certainly bring these to your attention via the report.

Observations:

• All major bullish percent (BP) indicators advanced over the past week. BPALL, BPNYSE, and BPOTC continued higher in a column of Xs and read 56%, 66%, and 52%, respectively. BPWORLD reversed up into a column of Xs and now reads 52%. 
• All major positive trend (PT) indicators moved higher in a column of Xs. PTALL and PTNYSE read 38% and 42%, respectively, while PTOTC and PTWORLD each reside at the 36% level. This is the highest level for PTNYSE since February 27^th of this year.
• All major HiLo indicators climbed higher as well, each breaching the 80% threshold. ALLHILO, NYSEHILO, and OTCHILO now read 84%, 82%, and 86%, respectively.
• Similarly, all major ten-week indicators pushed higher in a column of Xs. TWWORLD, TWOTC, and TWALL read 76%, 80%, and 84%, respectively, while TWNYSE reached the 90% threshold. For a recent study on TWSPX, click here.
• Rounding out the upward movement, we note all major thirty-week indicators advancing higher in a column of Xs. 30NYSE, 30WORLD, 30ALL and 30OTC read 28%, 32%, 36%, and 40%, respectively.

Over the course of the past week, we did see a change within the asset class ranking of DALI, with fixed income passing cash to take over the number one position by one signal following trading on Tuesday. The equity markets continued higher over the past week (5/27/2020 – 6/2/2020), and we did actually see the tally reading for fixed income and cash drop. Fixed Income lost six signals since this time a week ago and cash dropped ten signals. Domestic equity added one while international equity and commodity rose by eight signals and 13 signals, respectively. 

One thing that has been extremely difficult in this market has been the speed and velocity with which the market corrected and subsequently recovered, as well as the narrowness of the leadership. To put the speed of this pullback into perspective, it took the market just 22 days to fall 20% from the February 19th peak. This was the fastest correction of 20% we have ever seen (excluding the 1930s). In 2008, it took nine months for the market to correct 20% off the October 2007 high (October 2007 to July 2008). In 2002, it took 6 months to hit 20% down (January 2002 to July 2002). 

This correction also came off a rather strong move higher in equity after the December 2018 low. The S&P 500 up 44% from 12/24/18 to 2/19/20, also during the run First Trust Focus 5 FV was up 45% and the Invesco DWA Momentum Portfolio PDP was up 55%. That explosive move higher, while great for the 2019 calendar year, left a number of relative strength charts up on stems; therefore, in order to generate sell signals they needed to fall more than 20%. Not unlike 2018, which was a benefit to the portfolios, although this time around it was not. This brings us to the “why hasn’t domestic equity moved back up in DALI” question. Well for very similar, yet completely opposite reasons. As quick as the move down was off the Feb peak, the rally back has been equally as explosive to the upside leaving relative strength charts, in some case, far away from buy signals upon the initial reversals up. The best-case scenario would have been to get some back and forth action off the bottom to set up a buy signal from a much lower level, however, that didn’t happen for many charts. This “V-shaped” recovery the market has experienced is a very difficult environment for relative strength or trend following of any kind and is not the common bottoming process for the market. The 2002 bottom and the 2008/09 bottom you got quite a bit of back and forth at the bottom so those bottoms were more of a process than an event like this year.

It took the S&P 500 just 16 days to rally 20% off the March 23rd low! If we go back and look at all the major bottoms in the market the average length of time before rallying 20% is 84 days or nearly three months. This move off the bottom has been equally as explosive as the 20+% rally from November 2008 to January 2009, as well as the move off of the March 2009 low.

With all that being said, as we stand today (or at least thru June 2nd) there are 47 buy signals separating domestic equity from the number two asset class.  There are 14 domestic equity charts within DALI that are within 5% of returning to buy signals. A number of those are small caps and a number of signals would come at the expense of fixed income. So, if those were to happen that gap could get cut in half pretty quickly. This doesn’t account for the number of international equity and commodity charts that are close to moving back to buy signals against fixed income and cash. The combination of the speed of the sell-off and the speed of the recovery is the primary reason domestic equity hasn’t climbed higher and faster in DALI in this market environment. The initial move down was the fastest we have ever seen and the move off of the low is among the fastest the market has ever seen, taking just 20% of the duration of the average recovery period. The “averages” have been thrown out the window with this market on many different fronts, but in case you were wondering, the average return before hitting a peak during the previously mentioned recovery periods is 108% and the average duration from the low to the high is 937 days. The largest came off of the 1987 low when the market rallied 582% before peaking in March 2000 and the second largest was the 400% move off the March 2009 low. If the market continues it’s recovery, then we will see domestic equity return to one of the top-ranked asset classes. On the other hand, if this rally stalls out and pushes back lower then we are likely to see many of the individual relative strength charts reverse down which would then set up alternate potential buy signals. If you missed last week’s “Weekly DALI and US Equity Update” be sure to click here to review some more details on this subject as well as some specific relative strength chart examples.

Portfolio View - Major Market ETFs

Additional Comments:

It was another exceptionally strong week for the 10 major market funds covered in this report as all managed to finish in positive territory. The top two performing funds this week both came from the international camp – the iShares MSCI Emerging Markets ETF EEM posted an impressive gain of 6.15% while the iShares MSCI EAFE ETF EFA gained 5.05%. Conversely, the iShares SmallCap 600 Index Fund IJR lagged the pack despite finishing in positive territory with a gain of 1.87%. In the table below, we have updated initial support levels for all 10 major market funds covered in this report. Additionally, we want to highlight two notable intraday buy signals that happened today (6/3). Be sure to read today's International Equity Overview which discusses the positive trend changes we saw on the charts of the EEM and EFA. 

Last Wednesday, we brought to your attention the fact that the iShares SmallCap 600 Index Fund IJR had moved through its bearish resistance line at $68 with the day’s price action. As a result, IJR’s default chart moved back into a positive trend for the first time since flipping negative in late February. Over the last seven days, the small-cap fund managed to push higher to $69 before experiencing a slight pullback to $66 which triggered a three-box reversal into Os on the chart. However, with today’s market action, IJR has reversed back up into Xs where it broke a double top at $70, marking the second consecutive buy signal on the chart. From current levels, initial support is now offered at $66 and the fund will face the next level of overhead resistance at $76. This follow-through is undoubtedly a positive sign for IJR however the fund remains technically weak with a score of 1.11, well below the acceptable 3-threshold. Year-to-date, IJR is down -19.34%, underperforming the S&P 500 Index SPX by 14.70%.

Like its small-cap counterpart, today the default chart of the iShares S&P MidCap 400 Index Fund IJH broke a double top at $182 before moving higher to $184. This breakout marks the second consecutive buy signal on the chart, confirming that demand is in control. Currently, IJH has a relatively weak fund score of 2.43 and its year-to-date loss of -12.57% continues to lag the SPX by 7.93%. However, if we continue to see IJH’s technical picture improve from here, we can expect to see the score push higher. Be sure to set a score alert under “Set Alert” so that you can be notified when IJH moves above the 3-threshold. From current levels, IJH has support at $174 and faces resistance at $190.

SECTOR BULLISH PERCENT CHANGES

Average Level

58.72

TELE

COMP

prec

META

PROT

BANK

BIOM

TEXT

DRUG

EUTI

INET

TRAN

REST

CHEM

AERO

INSU

ELEC

BUSI

HOUS

SAVI

FOOD

MEDI

RETA

WALL

BUIL

OILS

HEAL

FINA

STEE

LEIS

MACH

WAST

OIL

GUTI

FORE

REAL

SOFT

AUTO

SEMI

GAME

0-14

16-20

22-26

28-32

34-36

38-42

44-46

48-52

54-56

58-62

64-66

68-72

74-78

80-86

88-100

SECTOR INDICATOR CHART CHANGES

PT is the percentage of stocks within a sector that are trading above their bullish support lines. RSX is the percentage of stocks within a sector whose relative strength charts are in a column of Xs. RSP is the percentage of stocks within a sector whose relative strength charts are on a buy signal. The strongest sectors, i.e. market leaders, will have most of these indicators positive and moving higher in a column of Xs.

FAVORED SECTOR STATUS CHANGES
A sector is considered to be Favored if it has 3 or 4 of the sector indicators (Relative Strength, RSX, RSP, & PT) positive, Average if it has 2 of the 4 indicators positive, & Unfavored if it has 0 or 1 of the indicators positive. The table below contains those sectors that have experienced a Favored Sector Status change over the past week. It is best to focus on sectors that are about 50% or lower on their Bullish Percent charts & are in Xs. Note: If a sector moves from Favored to Average, it doesn't necessarily mean that the sector in question has to be sold - it just means you need to evaluate your individual positions with exposure to that sector. 

Favored		Average	Unfavored
4	3	2	1	0
OILS  RETA	BIOM  ELEC  INET  PROT	INSU  TRAN  STEE	SAVI  BANK
4	3	2	1	0

The broader international equities asset class remains out of favor across most of our relative strength rankings, including the Dynamic Asset Level Investing (DALI) tool which has the asset class in the last ranked position out of the six spaces examined. With that said, we have seen some near-term improvement from certain areas around the world, which has led the international equities asset class to gain 11 buy signals over the past week – the most out of any asset class. The space is still 22 buy signals from the fifth-ranked commodities, but it is certainly significant to see this recent strength. As a whole, the more offensively-minded asset classes of domestic equities, commodities, and international equities have each continued to gain signals during the past five trading days, which is a further positive indication for “risk-on” investments such as those in foreign equity markets.

As we mentioned last week, the iShares MSCI EAFE ETF EFA moved higher to transition back to an overall positive trend with movement to $60 last week. The developed markets representative has seen further demand come in over the past five trading days, with EFA advancing intraday Wednesday to notch another X at $62. While this improvement is certainly a positive sign, it should also be noted that the recent rally has left the fund in overbought territory.

This week, we have also seen a further movement to the upside in our broad emerging markets representative, the iShares MSCI Emerging Markets ETF EEM. This fund broke a double top at $38 in trading on Monday, marking its third consecutive buy signal which also surpassed its bearish resistance line to move EEM back to an overall positive trend. The past two days have seen continued advancement, with EEM moving past further resistance and reaching $40 in trading Wednesday. In a similar vein to EFA, the emerging markets fund has seen a strong rally off its recent multi-year low of $30.50 but is now in overbought territory as well.

While there are a variety of factors that play into the price movement for foreign stocks, one of the more significant influencers is the strength of the US Dollar, which we track using the NYCE U.S. Dollar Index Spot DX/Y. Interestingly enough, DX/Y has shown deterioration over the past week, as the chart fell to give a triple bottom break on May 28^th before continuing lower to $98 on Thursday, which moved the index back to an overall negative trend. DX/Y has fallen further this week to a recent level of $97.50 through trading on Tuesday.

Taking a look at the recent performance comparison of EFA, EEM and DX/Y reveal that the emerging and developed market representatives have each gained over 11% over the past 30 days, while the US Dollar index has fallen by -1.37% (through 6/2). We can also see that both EFA and EEM have had about half of their recent improvement occur over the past seven days, with respective gains of 5.05% and 6.15%, while DX/Y has seen almost all of its recent decline come over the same timeframe, posting a loss of -1.30%. These developments are certainly at their initial stages, making them a place to continue to monitor as we head towards the halfway point of 2020.

• Fixed Income moved ahead of cash to take the number one spot in the DALI asset class rankings. 
• The US Treasury 10-year Yield Index TNX moved to a buy signal for the first time since April when it broke a spread triple top at 0.75% in Wednesday's trading. The index now faces overhead resistance at 0.775% with further resistance at 0.875%.
• Further out on the yield curve, the US Treasury 30-year yield index gave second consecutive buy signal in last weeks trading when it broke a spread triple top at 1.475%. In Wednesday's trading, the index printed three additional Xs on its default chart reaching 1.55%.
• The iShares Barclays 20+ Year Treasury Bond ETF TLT returned to a sell signal when it broke a double bottom at $162 in last Thursday's trading. The fund had previously given two consecutive buy signals.
• Also in last week's trading, the NYCE U.S. Dollar Index DX/Y broke a triple bottom at $98.50. The index then continued to lower to $97.50, violating its bullish support and returning to a negative overall trend in the process. If the dollar continues its decline it would be a major tailwind for holders of foreign currency-denominated bonds as a falling dollar increases the value of foreign assets. In the case of fixed income, the volatility of currency returns generally tends to be greater than that of straight fixed income returns, so currency movements often make up the largest portion of foreign bond returns.
• In Tuesday's (6/2) trading, the WisdomTree Emerging Market Local Debt ETF ELD returned to a positive trend for the first time since 2013. Despite the positive trend change, ELD has unfavorable 1.17 fund score and a -1.93 fund score direction. The fund currently yields 1.93%.

Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email james.west@dorseywright.com.

Data represented in the table below is through 06/03/2020:

Broad Market Commodities Report

Portfolio View - Commodity Indices

As the localities and municipalities around the globe begin to loosen lockdown restrictions, the appetite for commodities such as crude oil has begun to reemerge. Additionally, the potential for additional crude oil production, as measured by assessing the Baker Hughes US Crude Oil rotary rig count, is at its lowest level since 2010 with 222 operating rigs (source: WSJ). These converging factors have created explosive price action as net new demand has entered the crude oil market in recent months. After hitting a revised bottom (excluding temporary negative price action) of $7 on the chart in late April, Crude Oil Continuous CL/ has since rallied to mark three consecutive buy signals, ultimately culminating with yesterday’s chart reading of $36 in Xs. Despite this major move off of the bottom, CL/ is still down nearly 40% on the year and remains in a negative trend since January. Further, while the technical strength for the commodity is evident in the near-term, crude tests resistance at its current chart level of $36. A move to $37 would provide additional confirmation of this near-term rally and eliminate all resistance before the bearish resistance line comes into play at $44. From here, support is offered at $31.

Relative strength is a measure of how a stock is performing when compared to something else, in this case the S&P 500 Equal Weighted Index (SPXEWI). Each day the stock's closing price is divided by that of the SPXEWI, the resulting numbers decimal is moved two places and then plotted on a Point & Figure chart. Whenever the relative strength chart shows a double top buy signal (e.g. RS Buy or Positive Relative Strength), it suggests the stock is likely to outperform the market for the foreseeable future. Conversely, whenever the relative strength chart gives a double bottom sell signal (e.g. RS Sell or Negative Relative Strength) it suggests the stock will under-perform the market. Relative strength signals tend to last roughly 18 to 24 months on average. Consequently, changes from buy signals to sell signals (and vice versa) are important to be aware of as they are longer-term implications of a stock's likely performance versus the indices. Using the Point & Figure chart along with the relative strength chart will allow you to better ascertain risk-reward and other trade management tools, but we always want to over-weight our portfolios toward those stocks that are on RS buy signals, giving us the best chance of outperforming the broader market.

In the Optionable Universe, this week we saw 49 relative strength buy signals compared to 89 last week. On the sell side, there were 14 relative strength sell signals compared to 13 last week.

Symbol	Company	Sector	Price	RS vs Market Signal	RS vs Market Column	RS vs Peer Signal	RS vs Peer Column	Tech Attrib
AA	Alcoa Inc.	Basic Resources	9.920	Buy	X	Sell	X	3
AMSC	American Superconductor Corp	Industrial Goods & Svcs	7.910	Buy	X	Sell	X	3
EPR	EPR Properties	Equity REITs	34.410	Buy	X	Buy	X	4
GES	Guess Inc.	Cyclical Goods and Services	10.560	Buy	X	Sell	X	3
GOL	Gol Intelligent Airlines Inc. (Brazil) ADR	Cyclical Goods and Services	5.840	Buy	X	Sell	X	3
GPS	The Gap, Inc.	Retail	10.650	Buy	X	Sell	X	3
HSC	Harsco Corp	Industrial Goods & Svcs	12.010	Buy	X	Sell	X	3
DBI	Designer Brands Inc.	Retail	6.660	Buy	X	Sell	X	3
DFS	Discover Financial Services	Financial Services	52.390	Buy	X	Sell	X	3
LEN	Lennar Corporation	Cyclical Goods and Services	60.210	Buy	X	Buy	X	5
MOD	Modine Manufacturing Company	Automobiles	5.470	Buy	X	Sell	X	3
NBR	Nabors Industries, Inc.	Oil Drilling, Equipment Svcs	38.920	Buy	X	Sell	X	3
NTP	Nam Tai Property Inc.	Real Estate Investment & Services	7.560	Buy	X	Buy	X	4
CPRI	Capri Holdings Ltd	Cyclical Goods and Services	17.460	Buy	X	Buy	X	3
QUIK	QuickLogic Corporation	Semiconductors	5.520	Buy	X	Buy	X	4
RCL	Royal Caribbean Cruises Ltd.	Cyclical Goods and Services	56.000	Buy	X	Sell	X	3
RGR	Sturm Ruger & Company, Inc.	Industrial Goods & Svcs	71.170	Buy	X	Buy	X	5
SKYW	Skywest Inc	Cyclical Goods and Services	34.060	Buy	X	Sell	X	3
SMTC	Semtech Corporation	Semiconductors	52.770	Buy	X	Sell	X	4
TBBK	Bancorp, Inc.	Banks	8.420	Buy	X	Sell	X	4
TGI	Triumph Group Inc	Industrial Goods & Svcs	8.530	Buy	X	Buy	X	4
WCC	WESCO International, Inc.	Industrial Goods & Svcs	36.060	Buy	X	Sell	X	3
LB	L Brands Inc.	Retail	16.800	Buy	X	Sell	X	4
GEOS	Geospace Technologies Corporation	Oil Drilling, Equipment Svcs	7.820	Buy	X	Sell	X	3
SEAS	SeaWorld Entertainment, Inc.	Cyclical Goods and Services	17.290	Buy	X	Sell	X	3
FOXF	Fox Factory Holding Corp	Automobiles	73.940	Buy	X	Buy	X	5
NVGS	Navigator Holdings Ltd	Industrial Goods & Svcs	8.270	Buy	X	Buy	X	5
VRTV	VERITIV CORPORATION	Noncyclical Goods and Svcs	11.960	Buy	X	Buy	X	5
OEC	Orion Engineered Carbons SA	Chemicals	11.250	Buy	X	Sell	X	3
NK	Nantkwest Inc	Biotechnology	7.490	Buy	X	Buy	X	5
CLDR	Cloudera, Inc.	Software	11.240	Buy	X	Sell	X	3
YEXT	Yext Inc	Software	16.540	Buy	X	Sell	X	4
ALTR	Altair Engineering Inc. Class A	Software	39.820	Buy	X	Sell	X	3
DLPH	Delphi Technologies Plc	Automobiles	13.710	Buy	X	Sell	X	3
USX	US Xpress Enterprises, Inc. Class A	Industrial Goods & Svcs	5.300	Buy	X	Buy	X	4
MAXR	Maxar Technologies Ltd.	Industrial Goods & Svcs	16.140	Buy	X	Buy	X	5
AA.TR	Alcoa Inc. TR	Basic Resources	9.920	Buy	X	Sell	X	3
CFG.TR	Citizens Financial Group Inc TR	Banks	26.341	Buy	X	Buy	X	4
RCL.TR	Royal Caribbean Cruises Ltd. TR	Cyclical Goods and Services	57.299	Buy	X	Sell	X	3
SKYW.TR	Skywest Inc TR	Cyclical Goods and Services	34.370	Buy	X	Sell	X	3
WAL.TR	Western Alliance Bancorporation TR	Banks	38.682	Buy	X	Sell	X	3
WCC.TR	WESCO International, Inc. TR	Industrial Goods & Svcs	36.133	Buy	X	Sell	X	3
CLF.TR	Cleveland-Cliffs Inc. TR	Basic Resources	5.816	Buy	X	Sell	X	4
CPRI.TR	Capri Holdings Ltd TR	Cyclical Goods and Services	17.460	Buy	X	Buy	X	3
DFS.TR	Discover Financial Services TR	Financial Services	53.866	Buy	X	Sell	X	3
GES.TR	Guess Inc. TR	Cyclical Goods and Services	10.687	Buy	X	Sell	X	3
GPS.TR	The Gap, Inc. TR	Retail	10.953	Buy	X	Sell	X	3
LEN.TR	Lennar Corporation TR	Cyclical Goods and Services	60.540	Buy	X	Buy	X	5
PK.TR	PARK HOTELS & RESORTS INC TR		11.151	Buy	X	N/A	X	3

Symbol	Company	Sector	Price	RS vs Market Signal	RS vs Market Column	RS vs Peer Signal	RS vs Peer Column	Tech Attrib
CVM	Cel-Sci Corp	Biotechnology	14.420	Sell	O	Sell	O	0
EGHT	8*8, Inc.	Technology Services	14.290	Sell	O	Sell	O	0
FCN	FTI Consulting, Inc.	Industrial Goods & Svcs	120.720	Sell	O	Sell	O	1
HLIT	Harmonic Inc	Communications Technology	5.350	Sell	O	Sell	O	0
OXY	Occidental Petroleum Corporation	Oil Companies Secondary	14.750	Sell	O	Sell	O	0
MSI	Motorola Solutions Inc.	Communications Technology	139.660	Sell	O	Buy	O	1
RYCE	Amira Nature Foods Ltd	Food and Beverage	11.990	Sell	O	Buy	O	2
GTT	GTT Communications Inc.	Technology Services	7.890	Sell	O	Sell	O	0
MGNX	Macrogenics Inc	Biotechnology	21.960	Sell	O	Buy	O	2
CBMG	Cellular Biomedicine Group, Inc	Biotechnology	13.210	Sell	O	Sell	O	0
TDOC	Teladoc Health Inc.	Healthcare Providers	169.870	Sell	O	Buy	O	2
JBGS	JBG SMITH Properties	Real Estate Investment & Services	31.050	Sell	O	N/A	O
SMPL	Simply Good Foods Co	Noncyclical Goods and Svcs	16.790	Sell	O	Sell	O	0
MSI.TR	Motorola Solutions Inc. TR	Communications Technology	141.261	Sell	O	Buy	O	1

Daily Option Ideas for June 3, 2020